In many industries, including but not limited to the electronics and high-tech, warranty-related costs have increased by sizable sums. For an OEM, warranty management is a subset of after-sales service and repair processes. However, when broken down into sub-processes, it is seen that warranty management is much more than administering claims and payments between the OEM and its service providers and suppliers. Warranty processes are linked to many other business processes ranging from warranty registration to supplier collaboration and recovery, and the processes cover the entire value chain from service providers' customers to OEM's suppliers. Supporting these warranty and other functions requires robust computer applications for processing claims, reporting and analytics.
From an industry perspective, warranty management represents a major cost to OEMs and their suppliers, while simultaneously providing a revenue stream to dealers and the authorized repair networks. In some cases, dealers depend on warranty work to contribute an estimated 5-25% of the dealership's profits. Further, warranty-related costs are increased by the growing complexity of products, expansion of available warranty coverage and increasingly longer warranty periods. Warranties may also be a key contributor to customer satisfaction and loyalty, and can generate additional revenues via extended warranty sales. As seen in Table 1 below, warranty-related costs may account for a non-negligible percentage of a business's product sales.
TABLE 1Example of Warranty Cost per IndustryWarranty CostWarranty as %Companyin 2004 ($ millions)of Product SalesHewlett-Packard Co.2.3653.70%Dell Inc.1.1032.60%IBM Corp.8022.60%Motorola Inc.3871.30%Cisco Systems Inc.3662.10%Nortel Networks3494.40%Sun Microsystems Inc.3414.80%
In the past, warranty-related problems have been considered an isolated matter. However, despite the increasing criticality of warranty management, many OEMs and suppliers still treat warranty management as an administrative function supported by poorly integrated legacy systems, highly manual business processes and organizations. Additionally, many companies that sell products to consumers, such as consumer electronics, outsource the technical repair of their products, and the service for such repairs is often provided by small, independent shops. Existing controls of repair work orders (WO) at such service providers are often poor, opening the door for fraud. Fraud typically consists of reporting fictional repairs by submitting product serial numbers for products that have not been repaired, providing services to products out of warranty (e.g., more than 1 year), overcharging for the repair, and the like.
Therefore, there is a need for improved mechanisms for managing and executing warranty-related intake, validation, invoicing and reporting processes and tools.